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IBM's starting to get SaaSy

I had a great meeting this morning with the folks running the SaaS initiatives at IBM. They've put one of their very smart and connected people, Sean Poulley, in charge of their internal SaaS initiatives - he's a very experienced exec and business development guy within the WPLC (aka Lotus) division of IBM software group - and another very experience executive, RadoslavNikolov , is heading up SaaS partnering. They've begin to make their first SaaS acquisitions, starting with WebDialogs, and are clearly gearing up to do a lot more in SaaS.

I've been a big fan of IBM ever since being acquired by them in 2003. Sometimes here in Silicon Valley it's hard to get a sense of what a truly global force IBM is - I really enjoyed my time working there and made some great friends.

Intacct has a long-standing relationship with IBM. Our applications run in IBM data centers and on IBM infrastructure and we've been a premier SaaS partner for a long time. We recently held a series of events talking about the emergence of the on-demand ecosystem with IBM, salesforce.com and BlueWolf and touched more than 150,000 companies.

I think IBM has massive potential to be a major force in SaaS, but it will require them to go beyond their traditional partnering model of recruiting ISV's to build applications that drag along IBM hardware, software and services, which customers have to buy to run and use the applications. What do I mean by drag? In the on-premises software days, Intacct's more than 2,500 customers would have had to purchase, or drag along, 2,500 sets of servers, 2,500 sets of databases and middleware software, and 2,500 sets of operating infrastructure to support their financial applications. That's a lot of infrastructure across a large number of companies.

In the SaaS world, in which everything is running in centralized data centers, the very same applications require just a handful of copies of database software and middleware, running on far fewer servers. The equipment itself we use is clearly higher end, but Intacct, not our clients, pays for all of this, and we have economies of scale in buying our infrastructure. IBM also can make good revenue from operating and running data centers that run SaaS applications, but it's hard to see that this would offset the loss of all of the infrastructure software and hardware that isn't being deployed on customer site.

So while I think it will be a short-term challenge to shift away from the drag model, I think IBM has huge assets that they can leverage as the market shifts to SaaS. I would be shocked if IBM would not make a play to be the leader Platform as a Service - that's just a natural thing for them to do and would be a natural next step for their current technical platform infrastructure focus.

But there are many other things I hope IBM thinks about that could really make them an even more important and more differentiated player in the SaaS world. IBM has a terrific channel, that nearly all SaaS vendors would gladly pay a percentage of ongoing revenue to take advantage of. IBM could easily play a core role in SaaS by offering a clearinghouse for SaaS partner applications that span all categories of on-demand infrastructure, middleware and applications.

And if you think, like I do, that SaaS is going to dominate the market for business applications, you can easily see a world where companies won't have just one or two but will use 20 or more SaaS applications. I would love to see IBM offering business operations infrastructure to link those applications together. Take for example provisioning and de-provisioning users - IBM would be a natural to make sure that when an employee joins or leaves your company the right things happened immediately across every SaaSapplication you were using. And they could help with contracting and billing too - wouldn't it be far better to get one consistent bill with consistent terms across all of your SaaS applications instead of different billing from each vendor?

While I recognize there is a battle going on right now for Platform as a Service (PaaS) technical infrastructure being waged by Salesforce, Amazon, Google and others as the right place to develop new SaaS applications, I think that it will take a large company experienced at being vendor neutral like IBM to integrate business processes across all SaaS vendors and PaaS platforms.

After all, in my mind, in SaaS the Internet is the ultimate platform. But that doesn't mean we don't need to make it easy to do business as SaaS solutions proliferate - and I think IBM is one of the handful of companies that could really nail this problem, and would add tremendous value to the SaaS industry and business using on-demand solutions in doing so.

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